Why Do I Need to Qualify to Get a Merchant Account?

You did your homework, you picked out a credit card processing company that seems to fit your needs, and you submitted an application. You gave them your:

– Company name; address; and phone, fax and website information
– Name, social security number, and contact information of the officer(s)
– Business bank account information
– TIN (Tax Identification Number)
– Type of Business

Now what happens? It really doesn’t seem like a lot of information, but on the company’s website it says you could be approved in 48 hours or less. Although it may not seem like a lot of information to you, the credit card processing company can learn almost all they need to know to approve you – or not – with the basic information they get by using your social security number to do a personal credit check. Your credit history is very important. You see, when you sign a contract with a credit card processing company, you’re actually agreeing to their terms for borrowing money.

As money from a sale moves from the buyer’s payment transaction (swiping their card at your terminal or inputting the number into your payment page on your website) to the seller’s account, it passes through several approval processes. First, on behalf of the merchant, the credit card processing company submits the sale to the bank that issued the buyer’s card. The issuing bank accepts or declines the transaction and sends this information back to the processing company, along with the funds from sales that have been approved. Then the processing company credits this amount to the seller’s account – less their fees, of course.

Simple, right? Well, most of the time, the process runs smoothly. However, once the proceeds of the sale are deposited into the seller’s account, the issuing bank and the processing company assume the risk that the merchandise is acceptable to the buyer and won’t be returned. In other words, they loan you the money risking they won’t have to ask for it back in the event there is any problem with the sale. That’s why the credit processing company does a personal credit check. They want to know that you’re good for at least a percentage of the money your business generates in credit card transactions each month.

Does that mean if you have low or bad credit you’ll be turned down by the credit card processing companies? Not always. Provide the information requested on their application along with a short message about why your credit rating will show up as low. Perhaps you’ve recently gone through a divorce. Or maybe you lost your job due to the downturn in the economy and have decided to start your own business. Whatever the case, give the person reviewing your application some facts to help to better understand your credit score number. This may help you get approved, though you may be subject to higher processing fees to justify the risks, or you may be asked to set up a reserve account as insurance against the possibility of charge backs due to returns or other purchase disputes.

However, with the right credit card processing company, your bad credit may not even affect your rates. The key to finding the deal that is right for you is to find the credit card processing company that will look at you as an individual and not just a credit score number.